Wichita Properties v. Lanterman , 6 Kan. App. 2d 656 ( 1981 )

Meyer, J.:

This case involves the breach of a commercial lease. On December 27, 1977, appellee and cross-appellant H. Kent Lanterman (tenant) entered into a five-year written lease with E. N. Maisel & Associates. The terms of the agreement provided for a $3,000 letter of credit as security, issued by Central Bank and Trust, and the premises were to be used for the sole purpose of conducting the business of a liquor store. The lease provided that the premises could be used for no other purposes without prior written consent of the landlord. Under the lease tenant was not allowed to sublet the premises or assign the lease without prior written consent of the landlord. On December 27, 1977, the interest of E. N. Maisel & Associates was assigned to appellant and cross-appellee Wichita Properties (landlord).

Tenant took possession of the property on April 24, 1978, with rentals to commence on May 24, 1978. Rent due under the lease was $1,050 per month for the first year, and $1,108.33 per month for the second year, with an additional increase for each additional year. Tenant paid one month’s rent of $1,050.00. No other rent was paid. In May or June, 1978, tenant notified landlord that he had been unsuccessful in obtaining a liquor license but was attempting to find someone with a license to operate the store for him. On September 28, 1978, Central Bank and Trust revoked its letter of credit. In early October, 1978, landlord contacted tenant and tenant stated that he was unable to find anyone to run the store and that he did not intend to go through with the contract.

Landlord contacted a local realtor to advertise the premises as being available for lease. The sign already in the parking lot of the shopping center advertised that there was available space, but did not specify the tenant’s particular premises as being available. The landlord also sent a representative to Wichita in December once or twice looking for prospective tenants.

In January, 1979, landlord was contacted by ABC Rentals and after considerable negotiation, ABC ultimately entered into a lease to commence July 1, 1979.

Landlord brought this action against tenant for breach of the lease seeking $12,916.95 for total rent due, common area charges of $326.08 and real estate taxes of $990.20. Landlord also tried to introduce evidence of property damage of $2,710.91. Tenant objected to the introduction of this evidence because property damage was not mentioned in the pleadings. The court gave the landlord the option of continuing the trial for amendment of pleadings, but the landlord’s attorney stated that he did not want the leave to amend unless he could introduce the witness’ testimony to avoid recalling him at a later date. This was declined and landlord’s attorney stated he did not want the leave under such conditions. Central Bank and Trust was also joined as a defendant, and tenant filed a third party petition against Standard Liquor Corporation, which claim was not decided at the time of the appeal. (The claims appealed from were certified by the trial court pursuant to K.S.A. 60-254[b].)

The trial court granted judgment in favor of landlord on the issue of liability. The trial court also found that landlord was reasonably diligent in mitigating damages, only from and after January 1, 1979, during its negotiations with ABC Rentals and was, therefore, only entitled to rent for $6,300.00. The court denied the claim for taxes and charges for common areas. Landlord appeals on the damage issues and tenant cross-appeals from the summary judgment on the issue of liability.

Landlord’s first claim of error is that there was no substantial competent evidence to support the trial court’s finding that landlord failed to mitigate damages.

Landlord argues on appeal that the tenant had not abandoned the property until he notified landlord in early October that he did not intend to fulfill the contract. Landlord argues, therefore, that it was under no obligation to find a tenant until October, and after that time it listed the property with a realtor and had someone looking for prospective tenants.

The tenant argued that the duty to mitigate arose upon the tenant’s notifying the landlord in June that he could not obtain a liquor license, coupled with the continued failure to pay rent.

The trial court held that landlord had not fulfilled his obligation to mitigate damages until January when it began negotiating with ABC Rentals and that all efforts up to that time had been “lackadaisical.” The trial court also stated in its journal entry that the landlord’s duty to mitigate commenced when it learned the tenant had been denied a liquor license, i.e., in June, 1978.

The rule in Kansas regarding a landlord’s duty to mitigate was recently stated in Lindsley v. Forum Restaurants, Inc., 3 Kan. App. 2d 489, Syl. ¶ 3, 596 P.2d 1250, rev. denied 226 Kan. 792 (1979):

“Where a tenant, under contract to pay rent on real property, abandons the property and notifies the landlord of that abandonment, it is the landlord’s duty to make a reasonable effort to secure a new tenant and obtain rent before he can recover from the old tenant under the contract so as to lessen the injury. Following Gordon, Executor v. Consolidated Sun Ray, Inc., 195 Kan. 341, Syl. ¶ 3, 404 P.2d 949 (1965).”

Since the duty to mitigate does not begin until tenant abandons the property and notifies the landlord of that abandonment, the issue is whether there is any evidence before the October notification of the tenant’s abandonment.

Since the tenant told the landlord that he intended to find someone who could get a liquor license to run the place for him, it would seem that the tenant had no intent to abandon the premises. Tenant was unable to obtain a liquor license because he did not meet the Kansas residency requirements.

While clearly tenant was in breach of the lease upon missing the payments after June, in light of tenant’s expressed intent to continue to try to find an alternative method of running the liquor store, this is not evidence of abandonment and notification of said abandonment in June. We conclude, as a matter of law, that there was no abandonment until the landlord was notified of tenant’s intent to terminate the lease in early October, 1978. While we recognize the rule that this court is not to rew'eigh evidence or retry the facts, where said facts are undisputed and are clearly insufficient, this court may rule as a matter of law that there was no abandonment.

As to the months of October, November, and December, 1978, the evidence indicated some, but not much, effort to mitigate on the part of the landlord. The trial court concluded that from and after January 1, 1979, landlord used reasonable and proper attempts to mitigate its damages. The trial court found there was not a reasonable effort to obtain a new tenant prior to January 1, 1979.

“It is not the function of the appellate court to weigh conflicting evidence, pass on the credibility of witnesses or redetermine questions of fact and our only concern is with evidence which supports the trial court’s findings, and not with evidence which might have supported contrary findings.” Addis v. Bernardin, Inc., 226 Kan. 241, Syl. ¶ 2, 597 P.2d 250 (1979).

We cannot rule as a matter of law that the facts disclosed by the evidence constituted reasonable mitigation. There was no conflicting evidence; however, the trial court might have disbelieved the evidence presented, and certainly found such efforts to be insufficient.

Landlord next contends that the court erred in ruling that tenant did not owe prorated taxes and common area charges because he never occupied the premises.

The trial court found that the landlord was not entitled to recover under its claim for common area charges and real estate taxes because the tenant did not occupy the premises within the meaning of the lease agreement.

Section 6(b) of the lease provides:

“Common Area Charge. Tenant shall pay to Landlord as a ‘Common Area Charge’ a proportionate share of all cost and expenses of every kind and nature paid or incurred by Landlord in operating and maintaining the Common Areas. Such cost and expenses shall include but not be limited to maintaining, repairing and replacing, cleaning, lighting, snow and ice removal, line painting and landscaping of all vehicle parking areas and other outdoor Common Areas; providing security; providing public liability, property damage, fire and extended coverage and such other insurance as Landlord deems appropriate; total compensation and benefits (including premiums for workmens compensation and other insurance) paid to or on behalf of employees; personal property taxes; supplies; fire protection and fire hydrant charges; water and sewer charges; utility charges; licenses and permit fees; reasonable depreciation of equipment used in operating and maintaining the Common Areas and rent paid for leasing any such equipment; together with all costs of administration of the Shopping Center. Tenant’s Common Area Charge shall be determined by multiplying the total cost incurred by Landlord by the ratio of the square feet of floor area within the Premises to the total square feet of floor area leased and occupied within all the buildings in the Shopping Center. For the purpose of Paragraphs 4(a), 11(b) and 22 as well as this Paragraph 6(b) the term ‘floor area’ with respect to the Premises and with respect to all other leasable area shall refer to floor area on all levels, including mezzanines, basements or balconies. No deduction shall be made for columns, stairs, elevators or any interior construction or equipment. Any change in floor area in such buildings shall be deemed in effect on the first day of the next succeeding month following such change.

“Tenant’s Common Area Charge shall be paid in monthly installments on the first day of each month in an amount to be estimated by Landlord. Within ninety (90) days following the end of the period used by Landlord in estimating Landlord’s cost, Landlord shall furnish to Tenant a statement of the actual amount of Tenant’s proportionate share of such Common Area Charge for such period. Within fifteen (15) days thereafter, Tenant shall pay to Landlord or Landlord shall remit to Tenant, as the case may be, the difference between the estimated amounts paid by Tenant and the actual amount of Tenant’s Common Area Charge for such period as shown by such statement.”

Section 4(a) of the lease provides:

“Real Estate Taxes and Assessments. Tenant agrees to pay Tenant’s proportionate share of all real estate taxes and assessments, both general and special, levied and assessed by any lawful authority, for each calendar year during the term hereof against the land, buildings and all other improvements within the Shopping Center or against any land or improvements which may be added thereto. Tenant’s proportionate share shall be the total amount of such taxes and assessments multiplied by a fraction, the numerator of which shall be the number of square feet of floor area within the Premises, and the denominator of which shall be the number of square feet of leased and occupied floor area within all buildings within the Shopping Center at the time such taxes were levied or assessed, but excluding the floor area of any buildings within the Shopping Center which are separately assessed for tax purposes. Copies of tax bills submitted by Landlord to Tenant shall be conclusive evidence of the amount of such real estate taxes and assessments levied or assessed, as well as the item taxed.

“During the term of this lease, Tenant shall pay to Landlord, monthly in advance, an amount equal to l/12th of Tenant’s proportionate share of real estate taxes and assessments for the current tax year, as reasonably estimated by Landlord. If Tenant’s proportionate share of taxes with respect to any tax year is less than the total amount theretofore paid by Tenant for such period, the excess shall be credited against the payments with respect to real estate taxes next becoming due. If Tenant’s proportionate share of taxes for any tax year exceeds the total amount theretofore paid by Tenant for such period, Tenant shall, upon receipt of invoices from Landlord, pay the difference between the actual amount paid by Tenant and Tenant’s proportionate share of real estate taxes and assessments.”

In State Bank of Parsons v. First National Bank in Wichita, 210 Kan. 647, Syl. ¶ 1, 504 P.2d 156 (1972), it was held:

“Regardless of the construction of a written instrument made by the trial court, on appeal the instrument may be construed and its legal effect determined by the supreme court.”

There is no provision in the lease before us which makes tenant’s liability for taxes and common area charges conditional upon occupancy of the premises. The trial court erred in so construing the lease. Neither does the law make these types of charges conditional upon occupancy.

Landlord further claims that the court abused its discretion in excluding evidence of physical damage to the premises because of failure to include the theory in the pleadings.

K.S.A. 60-215(b) provides in pertinent part:

“If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence.”

The tenant objected to the introduction of the evidence of damage to the property. The trial court was within its discretion to order a continuance for the amendment of pleadings. Landlord cannot now complain after refusing to amend the pleadings.

The issue on the cross-appeal is whether the court erred in granting summary judgment on the issue of liability.

Tenant cross-appeals from the trial court’s granting of summary judgment on the issue of liability. The trial court held that tenant’s defense of inability to obtain a retail liquor license to operate the premises as a retail liquor store was not tenable because the occurrence was foreseeable at the time the lease was executed and the defense was a subjective impossibility rather than an objective impossibility.

Landlord claims that whether the denial of the liquor license was reasonably foreseeable is a question of fact, and further that the denial of a liquor license is analogous to a situation where a change in law renders performance impossible, making nonperformance excusable, citing 17 Am. Jur. 2d, Contracts § 419.

The Kansas courts have followed the rule that subjective impossibility is not a defense. In White Lakes Shopping Center, Inc. v. Jefferson Standard Life Ins. Co., 208 Kan. 121, 124, 490 P.2d 609 (1971), it is stated:

“The impossibility which will, or may, excuse the performance of a contract must exist in the nature of the thing to be done. It must not exist merely because of the inability or incapacity of the promisor or obligor to do it. (17A C.J.S., Contracts, § 463(1), p. 610; 17 Am. Jur. 2d, Contracts, § 506, p. 987; State Highway Construction Contract Cases, 161 Kan. 7, 166 P.2d 728; Winfrey v. Automobile Co., 113 Kan. 343, Syl. 4, 214 Pac. 781.)

“In Winfrey v. Automobile Co., supra, it was said:

“ ‘Where one agrees to perform an act possible in itself he will be liable for a breach thereof although contingencies not foreseen by him arise which make it difficult or even beyond his power to perform and which might have been provided against in the agreement.’ (Syl. ¶ 4.)”

The Kansas Supreme Court distinguished between subjective and objective impossibility of performance in State Highway Construction Contract Cases, 161 Kan. 7, 67, 166 P.2d 728 (1946):

“Respecting impossibility of performance of a contract after it has been executed, the authorities note that there is a difference between ‘the thing cannot be done’ and T cannot do it.’ (Restatement of Contracts, § 455, comment 1.) The first of these is referred to as objective and the second as subjective. The same distinction is made in Williston on Contracts (Rev. ed.), pp. 5411-12. Both authorities agree that the second statement, T cannot do it,’ never relieves the promisor, the reason being that the promisor had agreed and definitely bound himself to perform, and cannot be heard to say otherwise.”

While Kansas has not dealt with a factual situation in which a permit of license is denied by a governmental authority, several other jurisdictions have ruled on whether such a situation constitutes impossibility.

In Ogdensburg Urban Renewal Agency v. Moroney, 42 App. Div. 2d 639, 640, 345 N.Y.S.2d 169 (1973), the appellant claimed impossibility because federal funding had not been approved. The court held that appellant knew at the time that it entered the contract for purchase of the property that it would need federal approval if federal money was to be available and yet the contract was silent concerning approval. The court stated:

“[T]he defense of impossibility is only available where the performance is rendered impossible by the happening of an unanticipated event which could not be foreseen or guarded against in the contract.”

In North American Capital Corporation v. McCants, 510 S.W.2d 901 (Tenn. 1974), the court recognized the defense of frustration of commercial purpose. That doctrine provides that where there is a total or near total destruction of the purpose for which, in the contemplation of both parties, the lease was entered into, performance of the lease is excused. However, in this particular case, the doctrine was held inapplicable where the government failed to approve a site for a savings and loan. The court held that the failure to approve the site was reasonably foreseeable and that the defense of frustration of commercial purpose was not applicable.

In Helms v. Investment Co., 19 N. C. App. 5, 198 S.E.2d 79 (1973), the court granted summary judgment for plaintiff on the issue of liability for breach of contract to provide water and sewer facilities. The sole issue was whether prohibition by the city and county of sewer and water facilities would excuse the promisors of their obligation. It was held the parties in the exercise of reasonable care should have anticipated that they might encounter some difficulty from the city and county in view of current emphasis on pollution problems in metropolitan areas. Citing from 17A C.J.S., Contracts § 463(1), p. 611, the court stated:

“ ‘Where a party enters into a contract knowing that permission of government officers will be required during the course of performance, the fact that such permission is not forthcoming when required does not constitute an excuse for nonperformance.’ ” 19 N. C. App. at 8.

Under the facts of this case, the tenant knew that he would have to obtain a liquor license in order to run the liquor store. He should have provided in the contract for such contingency. Under these circumstances the defense of impossibility or frustration of commercial purposes has generally been held to be inapplicable. If tenant wished to raise some facts making the inability to obtain a liquor license unforeseeable, he should have done so by affidavit in a response to the motion for summary judgment. Our record shows that no response was filed.

“ ‘[T]here is an affirmative duty upon the non-moving party to respond with counter affidavits or take advantage of the alternatives offered to him, which are to ask leave to make additional discovery or to show good cause why he cannot obtain and present by affidavits facts essential to justify his position.’ ” Miller v. Sirloin Stockade, 224 Kan. 32, 36, 578 P.2d 247 (1978), citing from Gard’s Kansas C. Civ. Proc. § 60-256 (1977 Supp.), p. 98.

Also, it is noted in Dugan v. First Nat’l Bank in Wichita, 227 Kan. 201, Syl. ¶ ¶ 1, 2, 606 P.2d 1009 (1980):

“Summary judgment is proper only if there are no genuine issues of material fact.

“A trial court, in ruling on motions for summary judgment, should search the record to determine whether issues of material fact do exist.”

Further, in Collier v. Operating Engineers Local Union No. 101, 228 Kan. 52, Syl. ¶ 2, 612 P.2d 150 (1980), it is stated:

“An appellate court in examining the validity of a motion for summary judgment should read the record in the light most favorable to the party who defended against the motion. It should accept such party’s allegations as true, and it should give him the benefit of the doubt when his assertions conflict with those of the movant.”

The trial court committed no error in granting summary judgment against the tenant on the issue of liability.

In conclusion, the trial court erred in holding that the duty to mitigate commenced in June because of the absence of any evidence in the record to show an abandonment. Once the tenant advised the landlord that he was forsaking the lease — in early October, 1978—clearly the landlord then had a duty to mitigate. Since there was some evidence before the trial court relative to the months of October, November and December, 1978, upon which it could base a finding of failure to mitigate, we conclude that its ruling as to those three months must stand. The lost rent, shown as being due to landlord on his exhibit No. 16 of $12,916.95, must be reduced by the sum of $3,150.00 (same being for the $1,050 per month rent for October, November, and December, 1978), leaving the amount of rent which should have been awarded to landlord the sum of $9,766.95.

As we have noted, the trial court denied the landlord payment for common area charges on the ground that the tenant did not occupy the premises. This, too, we concluded was error. Since we have determined that the trial court must be affirmed as to tenant’s nonliability for rent for the months of October, November, and December, 1978, it follows that tenant is not liable for the common area charges for those three months. Therefore the common area charges of $326.08 shown to be claimed by landlord in its exhibit 16, must be reduced by the sum of $98.81, the same being the fourth quarterly charges (October, November, and December, 1978), during which quarter the tenant was not liable for such charges because of the ruling hereinabove that landlord had failed to properly mitigate during those three months of 1978. Therefore, landlord should receive in judgment for common area charges the sum of $227.27.

What we have said as to common area charges is likewise true as to the liability of tenant for taxes. We note, again by reference to the evidence in the case, that the $513.83 claimed by landlord for 1978 taxes was based on 221 lease days during 1978, or $2.325 per day. Tenant should be credited with 92 days (again those being the days during October, November and December, 1978), or $213.90. Landlord should thus receive judgment from tenant for taxes in the amount of $299.93.

From the above, we conclude that landlord should be awarded damages in the sum of $9,766.95 for rent, $227.27 for common area charges, and $299.93 for taxes owed by tenant, for a total judgment in the sum of $10,294.15 in favor of landlord. This case is remanded to the trial court for judgment in accordance with the views expressed herein.

Affirmed in part; reversed in part and remanded with instructions.